I spent days looking for a way to boot any and all ISO images from a USB drive. I envisioned being able to simply copy any bootable CD or DVD (Windows installers, OS X boot discs, Linux Live CDs and recovery discs like Knoppix, etc) to a USB drive and boot it normally. Some of the possible solutions I found included:

How to install Windows from USB: WinSetupFromUSB with GUI - Supports multiple Windows XP/2Kx sources in the same partition; BartPE/WinBulder/UBCD4Win/WinFLPC (NOT ramdisk versions) to any primary partition; Vista/Windows 7/Server 2008 setup to different primary partitions; PartedMagic; other grub4dos CD emulation compatible ISOs; SyLinux bootsector as a file, and optionally a directory, containing a Linux distro booting off SysLinux.

Having recently stumbled upon a floppy drive emulator, I started looking for a USB CD/DVD drive emulator and finally found a way to boot any ISO image from USB drive: the iodd 2501 (newer Zalman models available - see update 5 below). It is a 2.5" SATA drive enclosure with an LED display to select the desired ISO image. Simply create a "_ISO" directory in the drive root and dump your ISO images inside. That's it! The enclosure also has a write protect switch and eSATA support.

The iodd 2501 has booted every ISO image I have thrown at it, on both PC and Mac hardware. When I first tried using the device, the LED would only report "NO-_ISO", despite having followed the instructions exactly. It turns out that formatting as FAT32 in OS X's Disk Utility was the problem; I simply used fat32format under Windows and the problem was solved (NTFS and exFAT are supported with a firmware upgrade).

isostick is a similar CD emulator that uses microSD cards and a USB Flash drive adapter. Sadly, it only supports FAT32, though large ISO files can be split.

Finally got around to updating the firmware on my original iodd 2501. Since the English support site is gone now, here are the necessary files and instructions in case anyone else needs them (current as of May 2013).